South Africa has the second highest murder rate in the world. It is a favourite hangout for organised crime syndicates from every corner of the world..CORRUPTION...Who Cares ?
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Tuesday, February 18, 2014

World fraud champs

GRAEME HOSKEN | 19 February, 2014 00:19

South Africa is the world leader in money-laundering, bribery and corruption, procurement fraud, asset misappropriation and cybercrime. File photo
Image by: SUPPLIED
South Africa is the world leader in money-laundering, bribery and corruption, procurement fraud, asset misappropriation and cybercrime.

For the first time in nine years, the prevalence of economic crime is on the increase in South Africa.

And according to the Institute of Accountability, the spread of corruption is directly linked to the demise in 2009 of the corruption-busting Scorpions, which were replaced by the police's Hawks.

The PricewaterhouseCoopers South African edition of the Global Economic Crime Survey, released yesterday, fingers senior managers as the No1 culprit driving the "mind-boggling" theft.

The report revealed that 77% of all internal fraud was committed by senior and middle management.

The primary motivation for senior managers was greed, while junior management tended to commit these crimes because they perceived injustice.

PwC director Louis Strydom described as "mind-boggling" the loss South Africa suffered as a result of economic crime.

"Of the 134 surveyed South African respondents, four reported losing more than $100-million (R1-billion) each through fraud," he said.

Institute of Accountability director Paul Hoffman estimates that corruption has cost South Africa R700-billion over the last 20 years.

"The consequences of such losses are immense . and include reputation, financial [loss] and disruption," he said.

Africa and Eastern Europe reported the highest prevalence of bribery and corruption (39%), followed by the Middle East (35%), Asia Pacific (30%), Latin America (25%), North America (14%) and Western Europe (12%), Strydom said.

Infringements of competition law were an "increasing problem".

"Of the South African respondents, 3% lost between R10-million and R1-billion through such crimes over the past 24 months.

"There is no clear understanding around anti-competition laws [and] investigations are incredibly costly, requiring sophisticated forensic tools. The sooner we see high-level prosecutions for such crimes, the better," he said.

Globally, governments accounted for 46% of procurement fraud, followed by energy, utilities and mining (43%) and engineering and construction (42%).

In South Africa, vendor selection was the most targeted, Strydom said.

"Just look at how many projects, meant to assist the poor fail because of the misappropriation of funds."

The number of South African senior managers committing economic crimes was double the global number, he said.

"Procurement fraud cannot happen if there are no internal players. To deal with economic crimes there must be a focus on management.

Strydom said fraud-risk management was the most effective means of detection, and South African companies were ahead of their global counterparts in this area.

"Worrying though is that 20% of companies do not undertake risk assessments, with 18% of culprits only receiving warnings, while 9% of companies do nothing against perpetrators.

"It is encouraging that more South African companies (82%) than their global counterparts (49%) turn to law-enforcement agents to deal with (internal) culprits."

Externally, 63% of culprits in South Africa were turned over to the police, versus 61% globally.

Hoffman said corruption would continue until the government developed the political will to appoint an effective, independent anti-corruption entity.

"Currently we pursue a multi-agency approach . the problem with this in relation to corruption is that too much falls through the cracks, with no specific agency having the necessary clout to take on corruption in high places.

"The Hawks are not as effective as the Scorpions . they don't have the clout," Hoffman said.

Corruption Watch spokesman Bongi Mlangeni said the real cost of corruption was the loss of trust between leaders and the public.

In his State of the Nation speech last week, President Jacob Zuma said the fight against corruption was yielding results.

The government would establish a central tender board to prevent corruption within supply chains, he said.

Zuma highlighted the competition authorities' investigation of large-scale price-fixing in the construction industry and that guilty companies were fined R1.4-billion.

Profile of a fraudster

Male;
31 to 40;
University degree;
Employed in company for more than 10 years
PwC economic crime survey
5128 respondents;
93 countries;
50% of respondents were senior executives;
35% in listed companies, 9% in public sector and 50% in private companies.